Lisbon, June 26, 2025 (Lusa) - Consumer affairs association Deco Proteste said on Thursday that the reduction in personal income tax (IRS) rates is “good news for the middle and lower classes, but especially for the middle class”, allowing “some relief” that “will make a difference” in families’ monthly budgets.
Speaking to the Lusa news agency, legal and tax expert Magda Canas pointed out, however, that with the adjustment of the withholding tax tables, “taxpayers will pay less money to the State in their monthly deductions”, so “it is very likely that they will receive less in 2026”.
“During this year’s income tax return period, many taxpayers discovered they needed to pay more income tax than they expected, while others noticed that the refunds they usually received to cover extra expenses were lower,” notes Deco Proteste.
According to the organisation, “this happened because the authorities withheld less tax throughout 2024”, and “the same may happen in 2025, with an impact on refunds or additional payments in 2026”.
On Wednesday, the cabinet approved a draft law for an additional reduction in income tax of €500 million, which is set to take effect later this year. The cabinet has already submitted the measure to parliament.
In a statement, the cabinet highlighted that the approved proposal “allows for further tax relief, further reducing marginal rates in all brackets, up to the 8th bracket”.
The government’s proposal provides for reductions in IRS rates of 0.5 percentage points between the first and third brackets, 0.6 percentage points between the fourth and sixth brackets, and 0.4 percentage points in the seventh and eighth brackets.
“We are talking about a reduction in IRS rates in the first eight brackets, which means that anyone earning up to €83,000 per year will feel some relief,” said Magda Canas, highlighting, however, that it is “the middle brackets, between the fourth and sixth,” that will benefit most.
The Deco Proteste expert explains that “the Government estimates that savings could reach between €34 and more than €400 per year, depending on income level, and gives the example of a couple with two salaries of €1,500 per month, who could save around €165 compared to what the government projected at the beginning of this year”.
Compared to what they were paying before March 2024, the savings “are almost €700”.
For Magda Canas, these are “figures that make a difference in the monthly budget, especially in a context of rising prices” and at a time when, “taking into account the global context, they are still expected to rise further, particularly fuel prices”.
The legal and tax expert also pointed out that this proposal will take effect, “in principle, because it still has to pass through parliament”, from September.
“In other words, the new withholding tables will come into force with retroactive effect from January, and we may receive salaries and pensions paid in September and October in our bank accounts a little fatter, reflecting this adjustment,” she added.
PD/ADB // ADB.
Lusa
